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Too many jobs, not enough talent spurs Amazon to split HQ2

Amazon.com Inc.’s decision to split its new headquarters exposes a secret known to many companies: It is tough to find top tech talent.

As The Wall Street Journal reported Monday, the e-commerce company has scuttled its original plan to pick a single location for a second headquarters, opting instead to build two hubs, according to a person familiar with the matter. The move stems from Amazon’s need for that talent—and lots of it—so increasing the number of locations will provide better access.

Amazon is planning to build two hubs instead of one for its second headquarters because it needs more talent. (Reed Saxon / AP)

The competition for high-tech workers spans all of Corporate America. Today, companies from auto makers to insurers to health-care providers are duking it out with West Coast tech firms to attract and retain people with expertise in fields like software development, machine learning and big data.

Colleges and universities have raced to boost their offerings in engineering, data science and other hot tech-related fields, but it is still not enough. Combined, computer and information sciences and engineering accounted for just 9% of the 1.92 million bachelor’s degrees awarded in 2016, according to the Education Department.

Deciding on two, rather than one, headquarter locations gives Amazon more leeway. “They have to not only move to a place with a lot of workers they can pull from, but they’ll have to continuously pull from a region” to account for turnover, said Andrew Gadomski, who helps large employers execute recruiting campaigns.

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Amazon said early on in its extended search that it was interested in locations with a concentration of universities that could help supply technology workers. The shortlist includes Dallas; New York City; and Virginia’s Crystal City, a suburb of Washington, D.C. All have several higher-learning options.

The labor market for tech talent has tightened since Amazon started its search a year ago, said Jed Kolko, chief economist at Indeed.com. Existing tech hubs have had stronger job growth and therefore tend to be places with more expensive housing markets, so trying to attract or hire 50,000 workers to one place puts a strain on both the labor and housing markets, he added.

“One thing to watch is, if two places are ultimately chosen, how similar or different are they?” Mr. Kolko said. “If they are quite different in their housing costs or workforce, that would be a strong sign that Amazon is looking to put different functions in these different locations. If they are similar markets, then it may just be to avoid pushing up the cost of labor and having a large enough pool of workers to choose from.”

Hourly wages in the tech-heavy information sector rose more than 30% since the labor market began its postrecession expansion in 2010. That is the best gain among a dozen broad sectors tracked by the Labor Department, and well outpaces the 20% wage growth for all private-sector workers.

“There is a gold rush for certain kinds of tech talent, particularly in the areas of artificial intelligence and machine learning, which Amazon is quickly moving into,” said Erik Brynjolfsson, an economist and director of the MIT Initiative on the Digital Economy. He pointed to skyrocketing compensation for people with the right mix of technical skills.

One way big global tech companies have worked around the shortage of talent in the U.S. is to attract workers from outside the country. Amazon is among the biggest employer of students in the Optional Practical Training program, which allows international students to work in the U.S. for one year after graduation. A special waiver can be granted to graduates in science, technology, engineering and mathematics to extend their stay.

The program is widely viewed as a steppingstone to coveted H-1B visas, which the government caps at 85,000 for private employers each year. The H-1B visa program lets employers hire foreigners to work on a temporary basis in jobs that require highly specialized knowledge and a bachelor’s degree or higher.

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U.S. President Donald Trump ordered a review of the H-1B visa program but hasn’t yet cut the number of visas available. Companies and recruiters say that in the past year, the administration is more stringently pushing back on applications, asking more questions about whether companies truly need to hire foreign nationals for certain jobs because qualified candidates cannot be found in the U.S.

“We had been a magnet for tech talent for a long time,” Mr. Brynjolfsson said. “But with the way our immigration policy is headed, both in the laws and the posture, we’ve frighten away a lot.” The White House didn’t immediately respond to a request for comment.

President Trump has backed reductions to legal immigration, arguing that foreigners provide unneeded competition for Americans.

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